Thursday, January 4, 2018

Almost 44 million Americans are student-loan debtors, and every single one of them should see Betsy DeVos as their mortal enemy. Since President Trump appointed her as Secretary of Education, DeVos has done nothing to ease the suffering of college borrowers. On the contrary, she has done everything she can to prop up the venal and corrupt for-profit college industry, which has preyed on vulnerable and naive students, many of them minority members or just plain poor.

We have known for years that the for-profit college racket is a cancer. Senator Tom Harkin's 2012 report on the for-profits made that fact absolutely clear. And we know that a high percentage of people who take out student loans to attend these shyster colleges default on their loans. Nearly half of a recent cohort of borrowers who attended for-profit colleges defaulted within five years. It was recently reported that more than half of the students who took out student loans to attend 1,000 colleges and schools had not paid down one dime of their student loans seven years into repayment. Most of those 1,000 institutions are for-profits.

Minorities have been especially injured by the for-profit colleges. Three quarters of African Americans who take out loans to study at a for-profit college and then drop out eventually default.

In my view, the Obama administration did not do a great job of reining in the for-profit racketeers, but it did make an effort. The combined efforts of the Obama Department of Education and several state attorney generals brought down two bad actors: Corinthian Colleges and ITT Tech. These two organizations had a total of a half million students and former students at the time they closed and filed for bankruptcy.

And the Obama administration put regulations in place to process students' fraud claims--claims against Corinthian in particular. But Betsy DeVos derailed those regulations and appears intent on protecting the for-profits from fraud claims. She's cooked up a bogus formula for resolving fraud claims, awarding only partial compensation to victims.

As Steve Rhode noted in a recent essay, the DeVos DOE has not provided relief to a single student borrower who was defrauded by a for-profit college, although it has approved around 13,000 claims by former Corinthian students (while rejecting 8,600 pending claims).

DeVos also nullified an Obama-era regulation that would prohibit the for-profits from forcing their students to sign covenants not to sue as a condition of enrollment. In addition, DeVos is slow rolling the Public Service Loan Forgiveness Program (PSLF), which provides debt relief to people who devote ten years to public service. Indeed, the Trump administration proposes to do away with the PSLF program.

And if that weren't enough, the Republicans sent a bill out of the House Education Committee that would do away with student-loan forgiveness altogether. DeVos has not formally endorsed this bill, but she called it a "starting point." The bill, if it becomes law, would give student borrowers only two options--pay off their loans in ten years or go into a perpetual income-based program that would not end until the loans are paid off or the student borrower dies. Oh yes, and the bill would eliminate the authority of state attorney generals to police the student loan industry.

And what have the Democrats done in response to DeVos' shockingly obsequious behavior toward the for-profit college racketeers? Not a friggin' thing. Senator Elizabeth Warren--self-proclaimed consumer advocate, writes stern letters to DeVos and other government bureaucrats, but she can't point to a single accomplishment in terms of student-loan relief.

I give the Democrats grudging credit for at least introducing legislation that addresses the student-loan crisis. The Delaney-Katko bill (co-sponsored by 25 Democrats and one Republican) would open the bankruptcy courts to deserving student borrowers, which is really the only comprehensive solution to the crisis. But that bill will never make through a Republican dominated Congress that is totally beholden to the financial industry.

In my mind, the litmus test for Congress in terms of student-loan relief is the Warren-McCaskill bill that would bar the federal government from garnishing the Social Security checks of elderly student-loan defaulters. Passing this bill would at least alleviate the suffering of the 114,000 older Americans who are seeing their Social Security income reduced due to unpaid student loans.

It is not enough for Senators Warren and McCaskill to simply file this bill; they need to get it to a vote. What Republican would vote against that bill? Can't Senator Chuck Schumer and Representative Pelosi walk across the aisle and get Warren-McCaskill bill signed into law with bipartisan support?

Frankly, if there is not enough good will between Republicans and Democrats to enact the Warren-McCaskill Social Security relief bill, which only provides puny student-debt relief, then student debtors should say the hell with both parties and form a third political party.

In the meantime, Democrats should focus on getting Betsy DeVos out of Trump's cabinet. I don't know if her slavish catering to the for-profit-college gang amounts to high crimes and misdemeanors for impeachment purposes, but this I know: Betsy has got to go.

Tuesday, December 5, 2017

Representative Virginia Foxx (R-NC) looks like a kindly grandmother, and maybe she is. But she is also the Chair of the House Education Committee, and her committee's proposal for revising the Higher Education Act makes me wonder if she isn't a cartoon character from Looney Tunes.

The House Education Committee proposes to eliminate all student-loan forgiveness in the law to reauthorize the Higher Education Act. That's right--all student-loan forgiveness.

Currently, student borrowers can enroll in income-driven repayment plans that last from 20 to 25 years. At the end of that term, the remaining balance on a borrower's student loan is forgiven.

The Foxx committee's proposal eliminate those plans and replaces them with a plan that allows borrowers to make income-adjusted payments on their student loans until they they are paid off. Interest will accrue on these loans during the first ten years of repayment, when the loan balance is capped. But borrowers will continue making income-based payments on their loans until they are paid off or they die.

In short, if the GOP proposal becomes law in its present form (which seems unlikely), student debtors will have only two repayment options: the standard ten-year plan or an income-driven plan that doesn't end until the loans are repaid--which for most people will be never.

Representative Foxx's committee labeled this lunatic proposal the PROSPER ACT (Promoting Real Opportunity, Success and Prosperity Through Education Reform), but a more accurate title would be the Slavery Reinstatement Act.

Let's look at the facts. Last year, 1.1 million student borrowers defaulted on their loans at the average rate of 3,000 per day. And that's just for 2016.

How many Americans defaulted on their loans in past years and never got them reinstated? The Consumer Financial Protection Bureau reported that figure in its 2013 report, and it was 6.5 million.

Nearly six million more are in income-driven repayment plans, and several million borrowers are not making loan payments because they obtained economic hardship deferments. I estimate that from 18 to 20 million Americans are not paying down their student loans because they defaulted, obtained deferments or signed up for income-driven plans that only require them to make token repayments. Most of these people will never pay of their student loans.

And what's the GOP Education Committee's response to this catastrophe? An income-based repayment plan that never ends.

GOP advocates may argue that most borrowers in the proposed income-driven repayment plan will eventually pay off their loans. But that notion is delusional. Borrowers who can't pay off their student loans in ten years will likely never pay them off--no matter how long they make income-based payments.

The student-loan program in its present form is an unmitigated disaster. But Representative Foxx and her GOP cronies on the House Education Committee have done something I thought no one could do. They have come up with a plan that makes this disaster even worse.

Saturday, December 2, 2017

Congress is more divided along partisan lines than any time since Representative Preston Brooks caned Senator Charles Sumner on the floor of the Senate back in 1856. No major legislation gets passed with bipartisan support, and Republicans and Democrats seem content to be obstructionists rather than try to do something useful.

Is there no public issue on which Republicans and Democrats can agree? I think there is.

More than 40 million Americans have outstanding student loans, and at least 20 million can't pay them back. Last year, 1.1 million college borrowers defaulted on their loans--that's an average rate of 3,000 people a day. People who borrowed to attend for-profit colleges have suffered the most. Nearly half of these hapless souls default within five years of beginning repayment. Among African Americans, the pain is even worse. Three fourths of African Americans who took out student loans to attend for-profit schools eventually default.

Big problems require big solutions. As I have said before, the student loan crisis will not abate until for-profit colleges are kicked out of the federal student-loan program and distressed student debtors are allowed to discharge their student loans in bankruptcy. But these two fixes are politically impossible right now.

But Congress could approve smaller measures of relief if our elected representatives would just work together. For example:

Congress could pass a law barring the federal government from garnishing Social Security checks of elderly student-loan defaulters. Senators Elizabeth Warren and Claire McCaskill introduced a bill along these lines but it has gotten nowhere.

All student loans should be refinanced at current, low interest rates, something Hillary Clinton endorsed during the 2016 presidential campaign.

Our tax code needs to be amended to make clear that people who complete income-based repayment programs are not taxed when the remaining balance on their loans is forgiven. Representatives Mark Pocan and Frederica Wilson (both Democrats) introduced a bill to accomplish this reform but it has not become law.

Who in Congress--Republican or Democrat--could disagree with these reforms? Even our most Neanderthal representatives could not look their constituents in the eye if they voted against any of these proposals.

If this is so, how can Congress kick-start bipartisan student-loan relief? Here is a feasible scenario: Senator John Kennedy, a Republican from Louisiana, could contact Senators Warren and McCaskill and offer to co-sponsor their bill to stop the government from garnishing Social Security checks of elderly student-loan defaulters.Why do I nominate Senator Kennedy for this bipartisan overture? Because Kennedy has shown a commendable reluctance to follow the Republican party line on important policy issues. For example, he was one of only two Senate Republicans to vote against a law that allows financial institutions to force their customers to sign mandatory arbitration agreements.

If Senator Kennedy were to come on board for the Warren-McCaskill bill, other Republican Senators might also signal their support. Once this bill received some publicity, I predict the Warren-McCaskill-Kennedy bill would be adopted into law without a single dissenting vote in either the House or the Senate.

After this small victory, Republicans and Democrats could join together to provide further relief to suffering college borrowers: lowering interest rates on current student loans, imposing restraints on the government's rapacious debt collectors, revising the tax laws so that participants in income-driven repayment plans aren't taxed on forgiven loan balances.

All these reforms are feasible; indeed they might all pass through Congress with little or no opposition. Some broad-minded legislator just needs to reach across the aisle to get the ball rolling. Senator Kennedy, please make that call to Senator Warren and assure her you will support the Warren-McCaskill bill.

Published Articles

About Me

Richard Fossey is a professor at the University of Louisiana in Lafayette, Louisiana. He received his law degree from the University of Texas and his doctorate from Harvard Graduate School of Education. He is editor of Catholic Southwest, A Journal of History and Culture.